Obamacare may need a taxpayer bailout: Ex-HHS head

Former HHS Secretary Tommy Thompson weighs in on the fallout from the troubled debut of Obamacare. "Obamacare cannot function without young people," he says.

The rollout of Obamacare has been "absolutely chaotic," said Tommy Thompson, who served as U.S. Health and Human Services secretary under George W. Bush. But worse, he added, the new law is flawed and needs dramatic changes.

"It's actuarially unsound," the former Republican governor of Wisconsin said on CNBC's "Squawk Box" on Tuesday. "If you don't have the healthy young people involved, ... Obamacare cannot function. It's going to require a huge infusion of tax dollars or huge cuts."

One of the cornerstones of the new health-care law is that healthy young people will pay for medical insurance that they use less frequently than the elderly or the chronically ill.

But, Thompson said, from the view of a healthy young person, they may ask: "''Why do I want to do that?''"

Under Obamacare, most Americans have to buy insurance or face a tax penalty.

(Read more: Officials werewarned about Obamacare site woes NYT)

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Senator Tommy Thompson, R-WI

While at HHS, Thompson said he was responsible for pushing the Medicare Prescription Drug Plan (Part D) into law "on a bipartisan basis" a decade ago.

Addressing critics who say Medicare Part D has been a flawed endeavor, Thompson stood by it. "Part D was correct. If you look at the actuarial soundness of it, you'll find that it's even better than any of the estimates ever predicted."

"We've saved money every single year under Part D," he said—adding that in addition to "quarterbacking" Part D, he also was responsible for setting up the work necessary to implement it.

Looking at Obamacare through that prism, Thompson told CNBC what he would change.

"We cost too much on administration. We've got to cut that back. We've got to cut back on the paperwork, the rule-making. We've got to be able to have refundable tax credits," he said. "We've got to allow the insurance companies to make some rating decisions."

Exchanges at risk for becoming high risk pools: Expert

Discussing collaborative strategies the Obama administration should take on to better execute the Affordable Care Act, with former Aetna Chairman & CEO Ron Williams.

As for the insurers, former Aetna Chairman and CEO Ron Williams told "Squawk Box" on Monday: "Insurance by and large is sold, not bought. The only people who buy it are people who need health-care services."

He suggested "a pluralistic competitive environment" where the federal- and state-run health exchanges are just one of the options for consumers to get a subsidy for the coverage they're being required to purchase under Obamacare.

Using the health-care law that Republican Mitt Romney put into place as governor of Massachusetts as a comparison, Williams said the commonwealth implemented five steps over 20 years—something Obamacare did in one day. He added that all stake-holders in the new law need to come together to try to make it work.